Science and Technology for Pharma & Biotech, Nutrition … Group AG V2.pdf · Science and...

Pharma&Biotech

, / © Lonza

Science and Technology for Pharma & Biotech,

Nutrition and Well-being

Jefferies 2015 Healthcare Conference – June 2015

Toralf Haag - CFO

© Lonza

Corporate

2

Jun-15

Forward-looking

Certain matters discussed in this presentation may constitute forward-

looking statements. These statements are based on current expectations

and estimates of Lonza Group Ltd, although Lonza Group Ltd can give no

assurance that these expectations and estimates will be achieved.

Investors are cautioned that all forward-looking statements involve risks

and uncertainty and are qualified in their entirety. The actual results may

differ materially in the future from the forward-looking statements included

in this presentation due to various factors. Furthermore, except as

otherwise required by law, Lonza Group Ltd disclaims any intention or

obligation to update the statements contained in this presentation.

3

Jun-15

Agenda

1. Company overview

2. Segment overview

3. Key Opportunities

4. Full-Year 2015 Outlook

5. Mid-Term Guidance until end 2018

Corporate

4

Jun-15

Lonza Overview

Life sciences driven company

Headquartered in Basel (Switzerland)

Sales of CHF 3.640 billion in 2014

Global operations:

44 major sites

Employs ~9,800 people

Global leader in specialty chemicals and custom manufacturing:

Hygiene / Antimicrobials

Water treatment

Active pharmaceutical ingredients both chemical and biological

Cell therapy

Leading positions in product market niches:

Coatings & Composites

Food and Agro ingredients

Endotoxin detection

Cell-based research products

Corporate

5

Jun-15

Global Footprint

Headquarter in Basel, Switzerland

44 major sites

Employs ~9,800 people

Corporate

6

Jun-15

Lonza Segments

Pharma&Biotech

Segment

Bioscience Solutions

Custom Development

Custom Manufacturing

Water Treatment

Consumer Care incl.

Personal Care & Preservation

Nutrition

Hygiene

Agro Ingredients

Industrial Solutions

Wood Protection

2014 *1

Sales: CHF 2,154 mn

CORE EBITDA: CHF 360 mn

CORE EBIT: CHF 272 mn

2014 *1

Sales: CHF 1,446 mn



Our Markets: Our Offers:

*1 – CORE definition: see appendix

Specialty Ingredients

Segment

2014 Full-Year Results – 21 January 2015

Corporate

Technology Links Between Businesses

CDO

CMO

Bioscience

Development

Service

Toll

Manufacturing

Products


Consumer Care

Personal Care

Hygiene

Nutrition & Health

Agrochemical Solutions

Water Technologies


Wood Protection

“Cracker

Streams”

(Visp)

Fine Chemistry

Fermentation

Chromatography

Cell

Technologies

…

An

timic

rob

ials

(Arc

h)

Pharma&Biotech

Corporate

8

Jun-15

Growing Middle Classes in Emerging Countries

Lonza Target Markets

Consumer Care Water Treatment Wood ProtectionAgro SolutionsIndustrial

SolutionsPharma&Biotech

Offerings:

• Manufacturing

Services for API

CMO

• API –

Development

Services CDO

• Products &

Consumables for

Research &

Production

Offerings:

• Personal Care:

Active Ingredients,

Functionals &

Preservatives

• Nutritional

Ingredients (Vitamin

B3)

• Hygiene:

Antimicrobial

Products

Offerings:

• Custom

Manufacturing

Services

• Fertilizers &

Molluscicides

• Formulation

Solutions for Crop

Protection

(Biocides)

Offerings:

• Sanitizers & Other

Treatment

Chemicals for

Pools & Spas

• Feeder Systems for

Drinking Water

• Agricultural &

Industrial Water

Treatment

Offerings:

• Biocides &

Preservatives for

Materials Protection

• High-Performance

Materials for

Electronics &

Composite Industry

• Cracker (Verbund)

• Corrosions

Inhibitors &

Specialty

Chemicals for Oil &

Gas Applications

Offerings:

• Industrial

Preservatives & Fire

Retardants for

Pretreatment &

Surface Protection

of Wood

• Wood Building-

Material Brand

Capitalizing on Global Megatrends Across Markets

Growing World Population

Aging of Global Populations

Rapid Growth of Megacities

Corporate

Lonza’s Target Markets and Its Technologies

Corporate

Consumer Care Water Treatment Wood ProtectionAgro Ingredients Industrial

Solutions

Pharma&Biotech

Regulated Products/

Services

Biological Technology

Fine Chemistry

Biological/

Chemical

Conjugation

Q1 2015 Qualitative Business Update

Q1 2015 Qualitative Business Update – 28 Apr 2015

Q1 started with an overall good momentum

Business performance right on target, as expected

FX effects under control and being managed through

counter-measures and business performance

Enhanced operational performance and ongoing portfolio

optimizations in Pharma&Biotech

Specialty Ingredients performance supported by an overall

healthy market demand

Corporate

10

Jun-15

Q1 2015 Operational Highlights


Production ramp-up of recent investments providing

projected volume growth:

Niacinamide plant in Nansha (CN)

Agro Ingredients plant in Visp (CH)

Adaptations of large-scale microbial plant in Visp to

accommodate different customers successfully underway

Preparation to build-out assets for emerging technologies

(e.g. cell and viral therapy in the U.S.) making good

progress

Corporate

11

Jun-15

12

Jun-15

Agenda

1. Company overview

2. Segment overview




Corporate

13

Jun-15

Lonza Segments

Pharma&Biotech

Segment


Custom Development


Water Treatment

Consumer Care incl.


Nutrition

Hygiene

Agro Ingredients


Wood Protection

2014 *1

Sales: CHF 2,154 mn



2014 *1

Sales: CHF 1,446 mn






Segment


Corporate

14

Jun-15

Specialty IngredientsBusiness Profile

Consumer Care Antidandruff agents (Omadine™)

Emulsifiers & emollients

Anti-aging products

Preservatives against fungi and bacteria

(household and institutional cleaning)

Personal Care(Skin, scalp and hair care,

cosmetics, cosmoceuticals,

preservatives)

Hygiene (Disinfecting and

sanitization)

Antimicrobial formulations, biocidal actives,

preservatives, surfactants

Food & Beverage, Home Care, Health Care

(hospitals), Institutional (schools,

restaurants, cruise ships), Industrial (food

processing plants)

Nutrition(Enhancing health &

well-being)

Niacin and Niacinamide (vitamin B3) – used

in food, feed and pharmaceutical

applications

Carnipure™ and Carniking™ (L-Carnitine)

ResistAid™ (used in dietary supplements &

functional food/beverages)

15

Jun-15


Custom Manufacturing of agro-

chemical active ingredients, advanced

intermediates & basic chemicals

Molluscicides (Meta™, Axcela™) for

slug & snail control

Fertilizers

Proprietary seed & fruit treatment

(Frexus™)

Agro Ingredients

Sanitizers

Algaecides

Feeder systems

Biocides

Slimicides

Surfactants

Corrosion inhibitors

Water Treatment (Residential as well as Industrial,

Commercial & Municipal)

16

Jun-15


Wood preservatives and treatments

Fire retardants

Water repellants

Mold inhibitors

Sapstain control solutions

Wood Protection

Materials Protection (antimicrobials &

protective agents)

High-Performance Materials (components to

electronics & aerospace industry)

Performance Intermediates (HCN &

Diketene/Ketene derivatives, basic chemicals)

Oleo Chemical Derivatives (emulsifiers &

lubricants)

Oil & Gas (biocides)


17

Jun-15

Business Highlights

Consumer Care

Hygiene

Solid quarter for disinfection products with performance above expectations (particularly

wipe solutions and hard-surface cleaning products)

Continued advancement of the innovation stream in disinfecting wipes and pre-

registered formulated solutions for customers

New solutions for anti-bacterial hand-soaps with major customers

Nutrition

Vitamin B3 on target based on solid market demand in both human and animal nutrition

Growing market demand for energy beverages and sports nutrition led to increasing

demand for our Carnipure™ product offering

Personal Care

Results above target for anti-dandruff and hair-conditioning business – driven by

demand and innovation

Interest continued to build in Regenistem™, our newly developed skin-care product



18

Jun-15

Business Highlights

Agro Ingredients and Industrial Solutions

Agro Ingredients

Custom Manufacturing results overall on target with good capacity utilization

Meta™ started successfully, and geographic expansion on target

Formulation ingredients for crop-protection products and fertilizers gaining interest in the

agro industry


Coatings and Composites

Solid demand from electronics and aerospace industries resulted in long-term supply

agreements

Antifouling paints, building products and antimicrobial solutions performed strongly

Performance Ingredients

Slower start into the year



19

Jun-15

Business Highlights

Wood Protection and Water Treatment

Wood Protection

Record snowfall and cold winter in the U.S. leading to delayed deliveries while

weakening currencies in Europe and Asia Pacific had a negative impact on the business

In the EMEA region, the UK market continues to expand at a solid pace with upward

trend in other regions of Europe

Market continues to be stable in APAC

Water Treatment

Recreational business started with improved sales into the year

Solid sales in NAFTA and South Africa; FX had an impact on South America business

Expected growth in North America for ICMS business with initiation of new market

approaches



20

Jun-15

Lonza Segments

Pharma&Biotech

Segment


Custom Development


Water Treatment

Consumer Care incl.


Nutrition

Hygiene

Agro Ingredients


Wood Protection

2014 *1

Sales: CHF 2,154 mn



2014 *1

Sales: CHF 1,446 mn






Segment


Corporate

21

Jun-15

Lonza Custom ManufacturingBusiness Profile

Development and custom manufacturing of active pharmaceutical

ingredients providing integrated life-cycle management

Chemical Manufacturing:

Small molecules, conjugated antibodies (ADC), highly

active pharmaceutical ingredients (HAPI), peptides,

cytotoxics

Biological Manufacturing:

Monoclonal antibodies and recombinant proteins

Active substances and intermediates

Development Services:

Production platforms and technology

Feed systems

Nine production facilities in Belgium, China, Czech Republic,

Singapore, Spain, Switzerland, the United Kingdom and the USA

Pharma & Biotech

22

Jun-15

Lonza Bioscience MarketOfferings

Customers in pharmaceutical, biopharmaceutical, biotechnology and personal care companies, as well as academic and government research institutions.

Core technologies of primary cells and media, transfection, bioassays, mycoplasma detection and prevention, as well as endotoxin detection

Cell culture, transfection and pluripotent stem cell services

Endotoxin and mycoplasma detection testing services, recertification and sterilization services

Extensive expertise around the critical needs of regulated manufacturing environments

Custom products and services for production of biologics

Strong scientific and technical support

Worldwide distribution through network of direct sales and distributors

Pharma & Biotech

Business Highlights



Ongoing strong market demand in biologics and continuing good

utilization

Positive results from regulatory audits in Singapore, Portsmouth

and Spain

Viral Therapy commercialization plans and services continue to

advance for several late-phase portfolio products

Increased funding available for Cell Therapy and increased

investments from big-pharma companies

Pharma&Biotech

Business Highlights

Custom Development & Bioscience Solutions


Custom Development Services

Continued interest from customers across all regions and technologies

for development and clinical manufacturing services

Working closely with two European Innovation Clusters following the

signing of collaboration agreements

Multi-product GS Xceed™ license agreement signed with arGEN-X


Further improved performance compared with 2014 and improved

presence in China and APAC, despite continued low funding in Japan

and Europe markets

Research Products experienced first signs of a global recovery

Testing Solutions performance according to budget and plan24

Jun-15

Pharma&Biotech

Pharma&Biotech Segment

Customer Focused Market Approach

Mammalian Cell X X X X

Microbial Fermentation X X X X

Small Organic Molecules X X X

ADC X X X

HAPI X X

Peptides X X

Viral Therapy X X X

Cell Therapy X X X

BioResearch /

Consumables

Development

Services

Commercial

Manufacturing

Licensing

Clinical Phase Screening,

Pre-clinic

All phases Pre-clinic,

Phase I – Phase III

Launch and

Commercial

Production Scale

Product Success Probability

++++ ++

- - -- - -

Lonza’s Offerings

26

Jun-15

Agenda

1. Company overview

2. Segment overview




Corporate

27

Jun-15

Key Opportunities for Lonza

Stronger Focus on Target Markets B2B-marketing and sales approach

Expansion into emerging markets

Near Term Cost Reduction Arch integration

Visp Challenge

Longer Term Operational Improvements Manufacturing / Administration / Supply Chain

Site / legal entity consolidation

Cash Focus De-leveraging

EBITDA growth, capex / NWC control

Portfolio Management Business portfolio

Product portfolio


Excellent technology platforms

Leading edge capabilities in biologics as well

as process chemistry

Global asset footprint

Highly engaged and committed workforce

Ability to be an innovation partner

Access to new market segments following

the acquisition of Arch

#1 position in Custom Manufacturing and

Microbial Control

1

2

3

4

5

Key Strengths of Lonza

Corporate

28

Jun-15

Agenda

1. Company overview

2. Segment overview




Corporate

29

Jun-15

FY 2015 Outlook


Based on the current macro-economic environment, constant

exchange rates and anticipated worldwide growth rates, we

expect:

Sales growth, despite FX rate and raw material volatility

CORE* EBIT growth of at least 5% due to portfolio

optimizations, FX counter measures and further operational

productivity improvements

Ongoing optimizations of the worldwide production network

are expected to lead to a further improved CORE RONOA

of >15%

*CORE definition: see appendix

Corporate

30

Jun-15

Agenda

1. Company overview

2. Segment overview




Corporate

Lonza’s Target Markets and Its Technologies

Mid-Term Guidance Until End 2018 – 28 Apr 2015

Corporate

Consumer Care Water TreatmentWood ProtectionAgro Ingredients Industrial

Solutions

Pharma&Biotech

Regulated Products/

Services

Biological Technology

Fine Chemistry

Biological/

Chemical

Conjugation

31

Jun-15

Technology Links Between Businesses


32

Jun-15

Corporate

33

Jun-15

Priorities – Specialty Ingredients

• Build on strong hygiene expertise to enter new markets

• Enter adjacent fields for Personal Care and Nutrition applications

Consumer Care

• Build up fermentation platform for agro-chemicals

• Penetrate target markets with additional offerings

Agro Ingredients

• Focus on high-value products in coatings and composites markets


• Focus on next generation of metal-free wood protection products

• Introduce next generation of fire-retardant products

Wood Protection

• Build on #1 market position in residential water

• Expand reach and market share in industrial arena

Water Treatment

• Expand reach – globally and market-wise

• Share technology know-how from biopharma and specialty chemicals

across different markets, industries and technologies to capitalize on

synergies

• Become more operationally efficient



34

Jun-15

Priorities – Pharma&Biotech

A 5-Year Journey and Getting Fit for 2020+

• Build on leading position in commercial manufacturing

• Explore opportunities to expand existing asset basis

Biologics

(Mammalian &

Microbial)

• Realign the chemicals asset base to suit changing customer needs effectively

Chemicals (Small

Molecules, Peptides)

• Take advantage of leading position to bring emerging technologies to market (ADC, Viral Therapy, Cell Therapy)

Emerging

Technologies

(CT, VT, ADC)

• Grow from a solid basis and expand our product offerings



• Realign business models to satisfy customers’ future needs

• Reduce volatility further

• De-risk portfolio further

• Reduce capital intensity

CT: Cell Therapy, VT: Viral Therapy

ADC: Antibody Drug Conjugates

Pharma&Biotech

Mid-Term Guidance Until End 2018

Based on current macro-economic environment, constant exchange rates

and anticipated worldwide growth rates, we expect:

CORE* EBITDA approaching CHF 1 billion in 2018, driven by:

Further portfolio optimization

Continuous strengthening of customer and target-market

orientation

Increased implementation of cross-technology synergies

Higher share of businesses from new and emerging technologies

Further productivity improvements in our manufacturing and

business services network

*CORE definition: see appendix Mid-Term Guidance Until End 2018 – 28 Apr 2015

Corporate

Mid-Term Guidance Until End 2018

Targeting CORE* RONOA of 20% in 2018 (14.3% in 2014)

Growing sales by low to mid-single digits on average per year until 2018,

driven by:

Additional contribution from new technologies

Further productivity improvements in custom manufacturing

Supplementary build-out of service businesses

Growing market demand for innovative products in Specialty

Ingredients, especially in consumer-related areas and in the

specialty segment of our industrial business, namely

Coatings and Composites

Stringent portfolio management with focus on higher value products

Expanded global reach

*CORE definition: see appendix Mid-Term Guidance Until End 2018 – 28 Apr 2015

Corporate

Calendar of Events & Contacts

Important Lonza Group Dates

22 July 2015 Half-Year 2015 Results

29 Oct 2015 Third-Quarter 2015 Business Update

27 Jan 2016 Full-Year 2015 Results

22 Apr 2016 Annual General Meeting

Contacts

Dirk Oehlers Dominik Werner

Investor Relations Corporate Communications

T +41 61 316 8540 T +41 61 316 8798

F +41 61 316 9540 F +41 61 316 9798

[email protected] [email protected]

Corporate

37

Jun-15

mailto:[email protected]

mailto:[email protected]

38

Jun-15

Further Information

CORE Results as Defined by Lonza

Lonza believes that disclosing CORE results of the Group’s performance

enhances the financial markets’ understanding of our company because the

CORE results enable better comparison across years. Therefore, the CORE

results exclude exceptional items such as restructuring charges, impairments and

amortization of acquisition-related intangible assets, which can differ significantly

from year to year. For this same reason, Lonza uses these CORE results in

addition to IFRS as important factors in internally assessing the Group’s

performance.

39

Jun-152014 Full-Year Results – 21 January 2015

Corporate

40

Jun-15

Our Markets

Pharma & Biotech SegmentOfferings in the areas of:

Custom Manufacturing both chemical

and biopharmaceutical

Custom Development

Testing & Research

Specialty Ingredients SegmentOfferings in the areas of:

Personal care

Hygiene

Nutrition

Agriculture

Water treatment

Industrial solutions

Materials protection

Oil and gas

Wood treatment

Increasingly regulated

environment

Strong regulatory track record

Long-lasting relationships with

authorities

Long customer approval times

Strong long-lasting ties with

> 250 pharma groups

Long-term business planning

and commitment

Strong need for innovation

Process innovation

Manufacturing excellence

Our products are: Consumed by people for health and well-being

Used by consumers to ensure well-being

Used in the development and production of drugs and ingredients

Corporate

41

Jun-15

Ongoing Operational Plan 2013-2015

Key Opportunities

for Lonza

Go-To-Market-

Excellence

Initiative

Manufacturing Footprint

Optimization

Business Service

Excellence

Running

Projects 2012

Arch

Integration

Market-Oriented

Business UnitsVisp

Challenge

2 R&T Organizations

• Pharma&Biotech

• Specialty Ingredients

Executive Committee

1Stronger Focus on

Target Markets

2Near-Term

Cost Reduction

3Longer-Term

Operational

Improvements

4 Cash Focus

5Portfolio

Management

Organizational

Preparedness 2013

2 Operational Units

• Pharma&Biotech

• Specialty Ingredients

Corporate Functions:

Setting Standards

Regional Business

Service Organizations:

Executing Transformational

Services

Corporate

42

Jun-15

Roadmap – The Path to Sustainable,

Profitable Growth on a Solid Basis

Cost Reduction

Arch Integration

Visp Challenge

Corporate Function Review

Net Working Capital Management

Operational Improvement

Manufacturing Footprint

Administrative Value Chain

Organizational Review

Control CapexSpending

Portfolio Management

Products / Business Portfolio Analysis

Smaller Technology Acquisitions and Divestments

Focus on Target Markets

Addressing Megatrends

Emerging Markets

Market Approach

2012 2013 2014/15

Capital efficiency, return on net operating assets (RONOA), substantially reduced CAPEX

Corporate

43

Jun-15

Megatrends and Lonza’s Solutions

Megatrends Resulting In:Lonza Technology and

Product Offering

Growing world population

Ageing population in

Western countries

Movements of growing

population into

megacities

Growing middle classes

in BRIC-VISTA countries

Need for

Hygiene

Need for

Clean

Water

Need for

Personal

Care

Need for

Medication

Need for

Food

Water treatment systems including

sanitizers and feeder systems

Nutritional ingredients

Agro chemical

custom manufacturing

Fertilizers

Research & testing solutions

for pharma markets

Drug development services

Chemical and biotech

manufacturing expertise

& technologies

Hygiene & preservation solutions

Personal care products

Corporate

Focus Areas for Corp. Strategic Projects


44

Jun-15

Corporate

45

Jun-15

Example of Market Integration in

Agri-Feed and Food Industry

Agricultural Inputs

e.g. Seeds, fertilizers, genetics

Agricultural Production

e.g. Crops, cattle, poultry, fisheries

Raw Material Processing

e.g. Food handling, 1˚ processing

F&B Wholesale and Retail

e.g. Cash-and-carry stores, supermarkets

F&B Manufacturing

e.g. Final processing, ready-meals

F&B Services

e.g. Restaurants, canteens, cafes

Waste, Reuse and Recycling

e.g. Food banks, waste management companies

Ag

ric

ult

ure

/

Fe

ed

Fo

od

& B

evera

ge (

F&

B)

Source: Arthur D. Little analysis



46

Jun-15

Lonza Custom Manufacturing: Unique

Technology Portfolio for the Pharma Markets

• Unique worldwide technology position

based on strong investments in past five

years

• Uncontested leader in nearly all

technologies

47

Jun-15

CORE Site Concept – Visp Example

Characteristics of

Pharma&Biotech

Businesses

Capital intensity high

High maintenance required

CAPEX driven by new

technologies and market

demand

Regulatory experiences

QA/QC

Operations

Units

Operations

Units

Operations

Units

Operations

Units

QA/QC Eng. EHS

Rep. /

Mainten-

anceOperations

UnitsWaste

Treat.

Energy /

Utilities

Supply

ChainLogistics

FinanceCustom.

ServiceHR

Control-

ling

Operations

Units

CanteenFire

BrigadeIT

Site

Mngt

Operations

UnitsR&T R&T

Sp

ecia

lty In

gre

die

nts

Pro

du

cti

on

Pla

nts

Ph

arm

a&

Bio

tec

h

Pro

du

cti

on

Pla

nts

Corporate

48

Jun-15

The Antibody Drug Conjugates Example

Sp

ecia

lty In

gre

die

nts

Pro

du

cti

on

Pla

nts

Ph

arm

a&

Bio

tec

h

Pro

du

cti

on

Pla

nts

Operations

Units

Operations

Units

Operations

Units

Antibody Drug

Conjugates

Operations

Units

QA/QC Eng. EHS

Rep. /

Mainten-

anceOperations

UnitsWaste

Treat.

Energy /

Utilities

Supply

ChainLogistics

FinanceCustom.

ServiceHR

Control-

ling

Operations

Units

CanteenFire

BrigadeIT

Site

Mngt

Operations

UnitsR&T R&T

49

Jun-15

The Lonza Visp System

People

InfrastuctureReliability

Flexibility

Engage-

ment

HR

Manufact.

Support

Process

Improvement

Technical

Ability

Experience

Corporate

Thinking

QCRegulatory

Support

Waste

Treatment

Energy

Supply

Local Environment

Identification

Commitment

Core

Competencies

Plant

(Design)

Production

Operations

(Design)

Production

Process

(Design)

Logistics

Mainten-

ance

Media

Unions

Geography

Education

(Dual System)

Authorities

(Tax, Permits,

Responsiveness)

Community

Relation

Global

Environment

Swiss

Environment

Lonza

Environment

Markets

Customers

50

Jun-15

Rationale for VispChallenge

• Missing Market Orientation

• Complex Structure

• Suboptimal Portfolio

• High Asset Utilization

High Personal Resource Demand

Low Profit Contribution

per Asset

InefficiencyMissing

Effective-ness

Low Asset Profitability

51

Jun-15

VispChallenge – Update

Cost reduction

2013 2014

Challenge business

model

Optimization portfolio

Optimization

projects

New business projects

LONZA 2020, Innovation

action definition implementation continuation

Efficiency and capacity utilization

20122011 2015

52

Jun-15


Stronger Focus on Target Markets B2B-marketing and sales approach

Expansion into emerging markets

Near Term Cost Reduction VispChallenge

Coporrate Functions review

Longer Term Operational Improvements Manufacturing / Administration / Supply Chain

Site / legal entity consolidation

Cash Focus De-leveraging

EBITDA growth, capex / NWC control

Portfolio Management Business portfolio

Product portfolio


Excellent technology platforms

Leading edge capabilities in biologics as well

as process chemistry

Global asset footprint

Highly engaged and committed workforce

Ability to be an innovation partner

Access to new market segments following

the acquisition of Arch

#1 position in Custom Manufacturing and

Microbial Control

1

2

3

4

5

Key Strengths of Lonza

53

Jun-15

Stronger Focus on Target Markets

Situation

Sharpened / enhanced customer

and market focus will be the

driving force going forward

Stronger emphasis on B2B-

marketing excellence and sales

excellence

Innovations need to be more

market driven

Penetration of new geographic

markets where the major growth

takes place

Development of entry strategies

for new markets

Consequences

Lonza has a market focus in the

traditional target market pharma

industry

The company has strong science,

technology and regulatory

expertise because of the long-

lasting activities in the pharma-

market

The existing know how can be

used and lead to new business in

other market segments

The go-to-market approach needs

to be adjusted

1

54

Jun-15

Near Term Cost Reduction

Situation

New Management Committee member Beat In-Albon appointed to oversee Visp Challenge with full empowerment

Visp Challenge scope expanded to all activities at the Visp site

Review of manufacturing product portfolio and transformation of the technology portfolio at Visp

Consequences

Visp Challenge A significant number of cost and sales

improvement projects are on-going

Highly utilized production assets

Investment projects for new business on

the way

Even stronger focus needed

2

55

Jun-15

Longer Term Operational Improvements

Situation

M&A is on low priority while

improvement will start in the

area of:

The global manufacturing footprint

Administrative efficiency

The site and legal entity structure

Increased asset productivity

Consequences

M&A – activities have been on top

of the agenda of Lonza for the

recent years.

Measurable Operational Efficiency

improvements needs to come into

the focus now. Visp Challenge

started the way for all other

business units and sites, including

corporate structure worldwide.

3

56

Jun-15

Cash Focus

Situation

Deleveraging is high on the agenda

No equity increase needed for

refinancing reasons

Stronger focus on EBITDA –

generation to increase permanently

the incoming cash flow

Capex Management and Working

Capital Control get a stronger

weight in targets of the company

Divestments of non-core assets

(e.g. Performance Products –

concluded in Dec. 2012)

Consequences

On-going acquisitions and

significant investments, especially

in Asia, have led to a net

debt/EBITDA of 3.7 by the end of

2011. Until end of 2013 debt was

reduced substantially and was at a

net debt/EBITDA ratio of 2.77x

4

57

Jun-15

Portfolio Management

Situation

Core segments will drive strategy and

structure

Profitable growth perspective through

match between market potential and

Lonza technologies and capabilities

Innovation driven segments

Profitable specialty character for product

and services

Business Portfolio management remains

ongoing task for Lonza Board and

Executive Committee

Consequences

Latest with the integration of the

former Arch businesses, Lonza is

active in a broad variety of market

segments

Within the market segments there

is a need for actively managing the

different levels of the product

portfolio ranging from innovation to

market standard products

5

58

Jun-15

Lonza Is Able to Address Key Market Segments

Key Market Segments How Lonza Addresses These Segments

Pharma / Biotech

Personal Care / Hygiene

Food Value Chain

Water

Lonza gained critical mass through the Arch acquisition

Making use of the excellent Lonza tech platforms to grow

Agro business gained momentum based on Lonza-technologies

Staying competitive and broadening the offer to the food/feed

markets

The Water business unit covers already a variety of applications

Technology transfers to growing segments are on the way

Lonza is well positioned to harness megatrends and

to serve resulting market needs

Lonza is a respected leader in offering services to those markets

Broadening the offer and penetrating new markets is on the

agenda (e.g. Therapeutic Services)

59

Jun-15

Rollout of Lonza’s Technology Platforms

Key TechnologiesPharma /

Biotech

Personal Care /

Hygiene

Food Value

ChainWater

Testing

Fermentation

Fine Chemistry

Preservation

Cell / Viral Therapy

e.g.: Mammalian, microbial, development services,

L-carnitine

e.g.: Synthesis, conjugates, peptides, HAPI, cytotoxics, microreactor, Niacin

e.g.: Antimicrobials

e.g.: Endotoxin, Moda, “paperless”

e.g.: Therapeutics

Lonza is able to broaden offering to serve market needs

based on strong existing technologies

60

Jun 14

CORE – RONOA Development 2013–2016

CORE RONOA in %

Reduction of

NoA

Sales Growth

Go-to-Market

12.3%

Salary

Increase

Product Mix

Improvement

(Go-to-Market)

Further Cost

Reductions +

Productivity

Improvements

(Manufacturing

Footprint, BSX)

2016

16.0%

2013

Capital Markets Day - May 2014

Corporate

Net debt 2013-2014

1'8211'926

2'0112'103

before TL

write-off

2013 2014

reported

at constant currency

exchange-rate

10585

Mio CHF 282

Operative net debt reduction


Corporate

62

Jun-15

Key Financial Figures

CHF mn FY 2014 FY 2013 Change YoY

Sales 3,640 3,584 1.6%

EBITDA 737 647 13.9%

EBITDA Margin 20.2% 18.1%

CORE EBITDA 743 711 4.5%

CORE EBITDA Margin 20.4% 19.8%

EBIT 423 253 67.2%

EBIT Margin 11.6% 7.1%

CORE EBIT 475 436 8.9%

CORE EBIT Margin 13.0% 12.2%

Financing Costs (60) (119) (49.6%)

Tax Rate 15.0% 17.0%

Profit for the Period 237 87 172.4%

EPS (CHF) Basic 4.56 1.67 173.1%

EPS (CHF) Basic CORE 6.79 4.99 36.1%

Operational Free Cash Flow 476 519 (8.3%)

Change in Net Working Capital (94) 42

Capital Expenditures 180 210 (14.3%)

CORE RONOA 14.3% 12.3% 16.3%

Net Debt 2,011 2,103 (4.4%)

Number of Employees 9,809 9,935 (1.3%)

2014 Full-Year Results – 21 January 2015CORE definition: see appendix

Corporate

63

Jun-15

FY 2014 – Business Overview

Lonza delivered expected results with CORE EBIT growth of 11% in CER

(+9% reported) to CHF 475 mn, supported by both segments

CORE EBITDA margin at 20.4%, exceeded original guidance given in 2012 for

2015, one year ahead of schedule

CORE RONOA improved from 12.3% to 14.3% in 2014, reflecting the improvement

of profitability and asset utilization

Revenues grew by 3% to CHF 3.64 bn in constant exchange rates (+1.6%

reported), negatively impacted by the poor weather conditions in the residential

water treatment business, as well as the time-consuming, complex tech transfers

and qualifications/validations and portfolio optimizations (e.g. Hopkinton shutdown)

CORE EPS increased to CHF 6.79, an increase of 36.1%

For third consecutive year, we demonstrate that the transformation is continuing

and is making progress

Headcount (FTE) reduction in 2014 by 1.3% to 9,809 (-126 positions)

Based on strong cash flow and improved balance sheet, the Board of Directors is

proposing an increased cash dividend of CHF 2.50 per share for 2014


Corporate

64

Jun-15

FY 2014 – Operational Overview

In our cGMP sites, 34 regulatory inspections and 169 customer

audits were conducted successfully

Successfully executed process transfers from Hopkinton, MA

(USA) to Visp (CH)

New plant for niacinamide in Nansha (CN) started up as

planned in H2; Guangzhou (CN) plant ceased operation

Second large-scale ADC facility in Visp started up as scheduled

Capacity expansion for Agro Ingredients in Visp (especially for

bio-pesticide development and manufacturing) progressing as

planned

Rigorous attention to safety matters resulted in 2014 being a

record year, with all key targets exceeded


Corporate

65

Jun-15

FY 2014 – Additional Financial Highlights

Revenues increased by 3% to CHF 3.64 bn in constant

exchange rates (+1.6% in reported currency)

Operational free cash flow remained high with CHF 476 mn

Profit for the period increased by 172% to CHF 237 mn

Financing costs reduced substantially due to lower interest rates

Net debt reduction fully on track before the TL JV write-off of

CHF 85.4 mn and negative currency impact of CHF 105 mn,

ending at CHF 2.0 bn, which resulted in a net debt/EBITDA ratio

of 2.7x

Capital expenditure at CHF180 mn (CHF 210 mn in 2013)


Corporate

66

Jun-15


Consumer Care delivered solid results based on growing market demand and innovation

Excellent performance of the Agro Ingredients business based on rising demand, new product

launches and innovation

Industrial Solutions performed as planned based on good demand for new products introduced

Water Treatment was substantially impacted by unfavorable weather conditions

Wood Protection delivered solid results coming from improved residential and industrial segments

CHF (mn) 2014 % Changes YoY

Sales 2,154 2.2

CORE*1 EBITDA 360 4.7

Margin 16.7

CORE*1 EBIT 272 7.1 (13.0% in CER2)

Margin 12.6

Key Figures CORE EBITDA and Margin Progression

0%

5%

10%

15%

20%

25%

0

100

200

300

400

2010

2011

2012

2013

2014

CO

RE

EB

ITD

A M

arg

in

CO

RE

EB

ITD

A (

CH

F m

n)

CORE EBITDA (CHF million) CORE EBITDA margin (%)

1 – CORE definition: see appendix2 – CER: constant exchange rates 2014 Full-Year Results – 21 January 2015

67

Jun-15

Pharma&Biotech

Solid out- and dual-sourcing trends resulted in firm contract signing for commercial and clinical-

stage products across nearly all technologies, but mainly biopharma, in Custom Manufacturing

Manufacturing demand resulted in robust capacity utilization and high number of successful

product transfers, combined with successful customer audits and inspections by regulatory

authorities

Market interest in new technologies rising constantly (e.g. ADC, cell and viral therapy)

EBITDA and Margin Progression

0%

5%

10%

15%

20%

25%

30%

0

80

160

240

320

400

480

201

0

201

1

201

2

201

3

201

4

CO

RE

EB

ITD

A M

arg

in

CO

RE

EB

ITD

A (

CH

F m

n)

CORE EBITDA (CHF million) CORE EBITDA margin (%)

CHF (mn) 2014 % Changes YoY

Sales 1,446 1.4

CORE*1 EBITDA 385 9.1

Margin 26.6

CORE*1 EBIT 24518.4

(15.2% in CER2)

Margin 16.9

Key Figures


1 – CORE definition: see appendix2 – CER: constant exchange rates

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